Mgmt 499 - exam one

Porter's Five Forces

1. threat of new entrants

2. Bargaining power of buyers

3. Bargaining power of suppliers

4. Threat of substitutes

5. intensity of rivalry among competiton

Existing barriers to entry

1. economies of scale

2. Product differentiation

3. Capital requirements

4. Switching costs

5. Access to distribution channels

6. Cost advantages independent of scale

Managers need to be ambidextrous

long term effectiveness and short term efficiency

strategic management aims to help organization's

achieve their major goals and objectives

external control view of leadership

External forces determine the organization's success

Romantic View of Leadership

A leader is the key force in the organization's success

Strategic Management

consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages

Bargaining power of buyers

Buyers can force down prices, bargain for higher quality or more services, play competitors against each other

Threat of new entrants

the possibility that the profits of established firms in the industry may be eroded by new competitors

Buyers groups are powerful when:

1. Purchasing products in large volumes

2. Product is standardized

3. Profits are low & switching costs are few

4. Backward integration is possible

5. Buyers product quality is not affected by industry product

strategic management attributes

1. Directs the organization toward overall goals and objectives

2. Includes multiple stakeholders in decision making

3. Needs to incorporate both short-term and long term perspectives

4. Recognizes trade-offs between efficiency and effectiveness

Strategic Management Process involves

1. analysis 2. decisions 3. actions

Strategy Analysis

- setting overarching goals of the organization (vision, mission, strategic objectives)

- careful analysis of the organization's external & internal environment

- analysis needs to be done to effectively formulate and implement strategies

hierarchy of goals

firm's vision (top, most general) , mission statement (middle), strategic objectives (bottom, most specific )

organizational vision

- developed and implemented by leadership

-fundamental statement of an organization's values, aspirations, and long term goal

- destination driven + evoking passion

-capture both the minds & hearts of employees

mission statement

- encompasses purpose of the company & basis of competition / competitive advantage

- more specific than vision

- focus on the means by which the firm will compete

strategic objectives

- Used to operationalize the mission statement

- Provide guidance on how to fulfill mission & vision

- Are measurable, specific, appropriate, realistic & timely

- Can be short-term "action plans"

- Can be both financial and nonfinancial

- Should be challenging, yet help resolve conflicts

- Provide a yardstick for rewards & incentives

Efficiency

doing something at lower costs

Effectiveness

doing the right thing for the organization in terms of needs

Intended Strategy

strategy in which organizational decisions are determined only by analysis

Realized Strategy

strategy in which decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences

Operational Effectiveness

performing similar activities better than rivals

Stakeholders

the individuals or groups that have a stake in the success of the organization ; owners, employees, customers, community, etc.

Corporate Governance

the relationship among various participants in determining the direction and performance of corporations

corporate governance participants

shareholders, management, board of directors

shareholders

The owners of a company

board of directors

elected by the shareholders to represent their interests

Management

headed by the chief executive officer

social responsibility

the expectation that businesses or individuals will strive to improve the overall welfare of society

Triple Bottom Line

assessment of a firm's financial, social, and environmental performance

Stakeholder Management

a firm's strategy for recognizing and responding to the interests of all its salient stakeholders [two views]

zero sum

-stakeholders compete for attention & resources

- gain of one is a loss to the other

Symbiosis

-stakeholders are dependent upon each other for success & well being

-stakeholders receive mutual benefits

local line leaders

who have significant profit and loss responsibility

executive leaders

who champion and guide ideas, create a learning infrastructure, and establish a domain for taking action

internal networkers

who generate their power through the conviction and clarity for their ideas

vision

organizational goal(s) that evoke(s) powerful and compelling mental images

Perceptual acuity

the ability to sense what is coming before the fog clears

internal environment

the controllable elements inside an organization, including its people, its facilities, and how it does things that influence the operations of the organization

External Environment

the uncontrollable elements outside an organization that may affect its performance either positively or negatively

environmental scanning

involves surveillance of a firm's external environment

Predicts environmental changes to come

Detects changes already under way

Allows firm to be proactive

environmental monitoring

tracks the evolution of environmental trends, sequences of events, or streams of activities

competitive intelligence

- Helps firms define and understand their industry

- identify rivals' strengths and weaknesses

- helps firms avoid surprises

potential for unethical

- behavior while gathering intelligence

environmental forecasting

Predicts change and plausible projections about:

-Direction

-Scope

-Speed

-Intensity

of environmental change

Scenario Analysis

involves detailed assessments of the ways societal, economic, politics, or technological trends may affect an issue & development of alternative futures based on these assessments

SWOT analysis

a planning tool used to analyze an organization's strengths, weaknesses, opportunities, and threats

strengths and weaknesses

internal factors that can influence an organization's ability to satisfy its target market

opportunities and threats

external factors of SWOT

General Environment

composed of factors that can have a dramatic effect on firm strategy

General Environment Segments

Demographic

Sociocultural

Political/Legal

Technological

Economic

Global

Demographic Segment

easily understandable and quantifiable

- aging population

- rising affluence

- changes in ethnic composition

- geographic distribution of population

- greater disparities in income levels

sociocultural segment

forces that influence the values, beliefs, and lifestyles of a society

- more women in the workforce

- greater concern for healthy diets

- greater concern for the environment

political-legal segment

processes and legislation influence environmental regulations with which industries must comply

technological segment

Developments lead to new products and services, can create new industries and alter existing ones

Economic Segment

forces affect all industries.

•Interest rates•Unemployment

•Consumer Price Index

•Trends in GDP & net disposable income

•Changes in stock market valuations

Global Segment

forces offer both opportunities & risks.

•Increasing global trade

•Currency exchange rates

•Emergence of the Indian & Chinese economies

•Trade agreements among regional blocs (NAFTA, EU, ASEAN)

•Creation of the WTO (leading to decreasing tariffs/free trade in services)

•Increased risks associated with terrorism

general environment relationships

elements of the general environment interact with each other

Value Chain Analysis

views the organization as a sequential process of value-creating activities

value

the amount buyers are willing to pay for what a firm provides them and is measured by total revenue

primary activities

contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale

primary activities segments

1. inbound logistics

2. operations

3. outbound logistics

4. marketing and sales

5. service

support activities

either add value by themselves or add value through important relationships with both primary activities & other support activities

Support activities segments

1. procurement

2. technology development

3. human resource management

4. general administration

inbound logistics

are primarily associated with receiving, storing & distributing inputs to the product.

inbound logistics examples

- materials handling

- warehousing

- inventory control

- vehicle scheduling

- return to suppliers

inbound logistics factors

- location of distribution facilities

- warehouse layout

operations

all activities associated with transforming inputs into the final product form

Operations examples

- Machining

- Packaging & Assembly

- Testing or quality control

- Printing

- Facility operations

Operations Factors

- efficient plant operations & layout

- incorporation of appropriate process technology

marketing and sales activities

involve purchases of products & services by end users and includes how to induce buyers to make those purchases.

marketing and sales examples

- advertising and promotion

- sales force management

- pricing and price quoting

- channel selection and channel relations

marketing and sales factors

- innovative approaches to promotion and advertising

- proper identification of customer segments and needs

service

all actions associated with providing service to enhance or maintain the value of the product

service examples

- Installation & Repair

- Training

- Parts supply

- Product adjustment

service factors

quick response to customer needs

quality of service personnel

procurement

the process of purchasing inputs used in its value chain

procurement examples

- procurement of raw material inputs

- development of collaborative win-win relationships with suppliers

- analysis & selection of alternative source of inputs to minimize dependence on one supplier

technology development

Related to a wide range of activities

- Effective research and development activities for process and product initiatives

- Collaborative relationships between research and development and other departments

- State of the art facilities and equipment

- Excellent professional qualifications of personnel

- Use of data analytics

Human resource management

consists of activities involved in recruitment, hiring, training & development, & compensation of all types of personnel

HR examples

- effective employee recruiting, development, & retention

- quality relations with trade unions

- reward & incentive programs to motivate all employees

General Administration

involves:

- planning systems to attain overall goals & objectives

- relations with diverse stakeholder groups

- information technology to coordinate & integrate value-creating activities across the value chain

- Ability of top management to anticipate & act on key environmental trends & events, create strong values, culture & reputation

threat of new entrants depends on

existing barriers to entry

economies of scale

the cost advantage of producing more units to have lower individual production costs

high levels of product differentiation

market is saturated - difficult to enter if too many options

switching costs

costs that consumers must bear to switch from the products offered by one established company to the products offered by a new entrant

Cost Disadvantages Independent of Scale

Some existing competitors may have advantages

that are independent of size or economies of scale. These derive from:

• Proprietary products

• Favorable access to raw materials

• Government subsidies

• Favorable government policies

distribution channel

the means by which you deliver the product or service to the customer

Bargaining power of suppliers

Suppliers can exert power by threatening to raise prices or reduce the quality of purchased goods and services

A supplier group is powerful when

- only few firms dominate the industry [one supplier = limited options]

- competition from substitute products is low

- suppliers sell to several industries

- buyer quality is affected by industry product

- products are differentiated and have switching costs

- foreward integration is possible

backward integration

Movement in the direction of raw materials

foreward integration

when your supplier decides to expand their business by doing your work

threats of substitute products or services

substitutes come from a different industry yet offer same function as original industry

Rivalry tactics

include price competition, advertising battles, new product introductions, increased customer service or warranties

factors that lead to intense rivalry

- Numerous or equally balanced competitors

- Slow industry growth

- High fixed or shortage costs

- Lack of differentiation or switching costs

- Capacity augmented in large increments

- High exit barriers

Internet & Porters 5 forces model

blurs difference between rivals

Bargaining power of buyer - shifts greater power to end customer

reduces barrier of entry

creates new substitution threats

increases bargaining power of supplier

Complementors

products or services that have a potential impact on the value of a firm's own product

strategic groups

A set of companies that pursue a similar strategy in a specific industry

strategic groups help

- identify barriers to mobility that protect a group from attacks by other groups

- identify groups whose competitive position may be marginal or tenuous

- chart the future direction of firms' strategies

-to think through the implications of each industry trend for the strategic group as a whole

outbound logistics

includes collecting, storing, & distributing the product or service to buyers

outbound logistics examples

- Finished goods

- Warehousing

- Material handling

- Delivery vehicle operation

- Order processing

- Scheduling & distribution